The search for suitable alternative for fossil fuel has been a challenge to the research community for the past two decades. So many alternatives have been identified and tested. However, a complete replacement cannot be provided without any penalties of cost, excess emission, poor operation, etc. The alcohols gave a new opportunity and a solution for the above problem but had some setbacks of increased density and lower octane number. The present workfocuses on striking a balance between advantages and disadvantages by using oxygenated additive with gasoline fuel. The additive cerium oxide (CeO2) along with methyl tertiary butyl ether (MTBE)offers many advantages. The seven samples, namely M10, M15, M20, M25, M20+50mg/l, M20+100mg/l, M20+150 mg/lhave been preparedand tested on Sprk Ignition (SI) engine. Here, 10, 15, 20,and 25 denote the MTBE volume in blends and 50 mg/l, 100mg/l, and 150mg/l indicate the CeO2 in blends. The results have shown that only MTBE has caused an increase of 4% in Brake Thermal Efficiency (BTE)with M15 and then BTE has improved by 3% with M15+100mg/l compared with pure gasoline. And, fuel consumption has also been reduced upto 9% with M20 and 11% with M15+150mg/l compared with pure gasoline. The maximum HC and CO reductions have also been observed from M20 and M20+150mg/l ; it was up to 19% and 22%, 23% ,and 25% of HC and CO with M20, M20+ 150mg/l. However, there has been an increase in CO2 emission level because of excessive unburnt hydrocarbon (HC) reduction. The MTBE with CeO2 has proved to be suited to all running conditions. The blends having more amounts of additive produce good combustion characteristics yet it should be restricted within 20 vol% of MTBE and 150mg/l of CeO2.